Corporate & Business Law:
Mock Exam 3:
Question#1:
(1 Marks)
What is the statutory minimum notice period which must be given to an employee who has been
continuously employed for 18 months?
A. One week
B. Two weeks
C. One month
Question#2:
(2 Marks)
A mother offers to pay her son, Jayson, £5,000 as an incentive whilst he is studying for his ACCA
exams. She is also the partner in a firm of accountants, which makes him an offer of employment at
£35,000 per year if he successfully completes his studies. Jayson accepts these offers.
Jayson passes his exams but his mother does not pay him the £5,000. He also receives a letter from
the accountants, which says that the job will now only pay £20,000 per year.
For each of these cases, indicate whether or not it will give rise to contractual relationships under
which Jayson may sue for a breach because he will not receive the money he expected.
.
Yes
No
A. The job
B. The £5,000 incentive
Question#3:
(1 Marks)
For a straightforward case involving a claim for £18,000, which of the following tracks would be
allocated under the Civil Procedure Rules?
A. Small claims track
B. Multi-track
C. Fast track
Question#4:
(2 Marks)
Unsure plc has been placed into insolvent liquidation and owes money to the following people:
(1) Terry is owed £50,000 for goods delivered last month
(2) Pat is owed £800 in unpaid wages
(3) Sarah is owed £250,000 on a loan secured via a floating charge validly registered
In what order will the above creditors be paid?
A. 3, 2, 1
B. 1, 3, 2
C. 2, 1, 3
D. 2, 3, 1
Question#5:
(2 Marks)
In the context of the law of contract, indicate whether or not each of the following is valid
consideration.
.
Valid Not valid
A. A promise to undertake decorating work in return for one months accommodation
B. Improvements made to a property which the owner later agrees to pay for
Question#6:
(2 Marks)
In the case of a members' voluntary liquidation, which of the following is a responsibility of the
liquidator?
A.
B.
C.
D.
To call a formal general meeting for members
To convene a meeting of the company's creditors
To make a statutory declaration of insolvency to the members
To request an ordinary resolution to confirm the appointment
Question#7:
(2 Marks)
Henly's Ltd runs occasional property auctions. Grunty Ltd provides a range of printing services.
For each of the following, indicate if it represents an offer or an invitation to treat.
.
Offer Invitation to treat
A. A poster for an auction sale of a house next week at Henly's Ltd
B. A catalogue and price list circulated by Grunty Ltd for printing various posters
C. A letter from Grunty Ltd to Henly's Ltd stating the price for printing posters for the house auction
D. A bid at Henly's Ltd auction sale for a house
Question#8:
(1 Marks)
In the event that a partnership is terminated, which of the following liabilities would be repaid first?
A. Outstanding salary owed to a partner
B. A loan made by a partner to the partnership
C. A debt owed to a trade creditor
Question#9:
Which of the following remedies is always available for breach of contract?
(1 Marks)
A. Repudiation
B. Damages
C. Specific performance
Question#10:
Which of the following is NOT created by judges?
A. Common law
B. Equity law
C. Orders in Council
(1 Marks)
Question#11:
Which of the following statements about tort is correct?
(1 Marks)
A. It is concerned with the infringement of the rights of another
B. The object of proceedings is to punish the offender
C. It involves the breach of a contractual arrangement
Question#12:
(2 Marks)
Sian has obtained the following shares in a public company:
(1) 100 shares with a nominal value of £1 each, for which she paid £0.50 per share and will pay the
remainder when requested by the company
(2) 500 shares with a nominal value of £1 each, for which she paid nothing but will contribute future
technical expertise
(3) 1,000 shares with a nominal value of £1 each, for which she paid £0.50 per share and will be
required to make no further payment
Which of these transactions are unlawful under the provisions of the Companies Act 2006?
A. 1 and 3 only
B. 2 and 3 only
C. 1, 2 and 3
D. 2 only
Question#13:
Which of the following is a reason treated by a judge as a basis for their decision?
(1 Marks)
A. Ratio decidendi
B. Stare decisis
C. Obiter dicta
Question#14:
Which of the following is NOT a duty imposed by law on an employer?
A.
B.
C.
D.
(2 Marks)
To allow employees time off to look for
alternative work
To allow an employee time off work to perform certain public duties
To allow a pregnant employee time off work for antenatal care
To allow employees who are trade union officials time off to attend to official union duties
Question#15:
(1 Marks)
Which of the following is NOT part of the role of non-executive directors in a company?
A. Bringing independent, external expertise to the decision-making of the board
B. Promoting the success of the company through effective day-to-day engagement with company
decision-making
C. Helping to hold executive directors accountable at board level
Question#16:
Which TWO of the following statements about fraudulent trading are correct?
(2 Marks)
A. It can result in both a civil and a criminal action
B. Only directors and shadow directors may be liable for fraudulent trading
C. It is defined as trading when the person is aware or should have been aware that the company was
insolvent and failed to minimise losses
D. It constitutes trading with the intention to defraud creditors
Question#17:
(2 Marks)
Which TWO of the following statements about a company administration order are true?
A. Fixed chargeholders are still able to repossess charged assets during administration
B. The administration will end after 12 months or when it has been successful
C. Once an administration order is granted, all of the company's employees are automatically
dismissed
D. The administrator may state that the company cannot be rescued
Question#18:
(2 Marks)
Billy bought Ade's car for £1,000. Billy gave the car to Chloe, his wife. The car had a faulty gearbox and
has just broken down and is irreparable.
In relation to privity of contract which of the following statements is true?
A. There is no right to sue
B. Chloe can sue Ade
C. Chloe can sue Billy
D. Billy can sue Ade
Question#19:
(2 Marks)
For each of the following statements regarding types of law, indicate whether it is true or false.
.
True False
A. Criminal law is part of public law
B. Equity introduced fairness to the legal system
C. Statute law is made by the judiciary
D. Common law developed before equity
Question#20:
Which of the following statements regarding contractual terms is correct?
(1 Marks)
A. An express term in a contract must always be in writing
B. A term can be implied into a contract by custom
C. An express term always overrides an implied term
Question#21:
(1 Marks)
Which of the following statements about an ordinary partnership governed by the Partnership Act
1890 is true?
A. The partnership agreement must be in writing
B. Each partner is personally liable for all the debts of the partnership
C. The maximum number of partners is restricted to 20
Question#22:
Which TWO of the following statements regarding exclusion clauses are correct?
(2 Marks)
A. An exclusion clause need not be put forward before the contract is concluded
B. An exclusion clause can be incorporated into a contract by way of sufficient notice
C. At common law, a person who signs a document which contains an exclusion clause is bound by its
terms even if they have not read the document
D. In respect of signed contracts an onerous term must always be highlighted to the other party
Question#23:
Which of the following statements regarding wrongful dismissal is correct?
(1 Marks)
A. Dismissal with less than the contractually-stated notice is always wrongful
B. The usual remedy is damages based on loss of notice period
C. Immorality will always be accepted as a justifiable reason for dismissal
Question#24:
(2 Marks)
Are each of the following a feature of a sole trader or a limited company?
.
Sole trader
Limited company
A. Profits accrue directly to the owner
B. Limited liability
C. Can continue to exist even after death of the owner
D. Regulated internally by legislation in terms of procedures and administration
Question#25:
(1 Marks)
According to the Unfair Contract Terms Act 1977, which of the following clauses would be
automatically void?
A. One excluding liability for negligence which has resulted in personal injury to another party
B. One excluding liability for negligence which has caused damage to another's property
C. One excluding liability for negligence which has caused financial loss to another party
Question#26:
(1 Marks)
Which of the following would give rise to a dismissal that would be regarded as redundancy?
A. An alteration of work so that the same work is required but by different means
B. The relocation of an employee whose contract has a mobility clause
C. A reduction in the need for the work done by the employee
Question#27:
(2 Marks)
Which TWO of the following are circumstances when a court may decline to follow a precedent that
would otherwise be binding?
A.
B.
C.
D.
Where the previous case had been made per incuriam
Where the previous statement was made obiter dicta
Where the decision was taken by a higher court
Where it is possible to distinguish the facts
Question#28:
(2 Marks)
A general meeting of Lump plc is needed because the directors wish to put a resolution to the
members seeking a change to the articles of association. At least 15% of the members will not vote in
favour of this resolution.
Which TWO of the following statements are true?
A. The directors may call the meeting to be held tomorrow
B. Notice must be sent to all members
C. The notice must contain a proxy notice, indicating that a member may appoint someone to vote on
their behalf
D. A notice should contain a brief outline of the resolution proposed
Question#29:
(1 Marks)
Which of the following divisions of the High Court hears cases relating to bankruptcy?
A. Family Division
B. Queen's Bench Division
C. Chancery Division
Question#30:
(2 Marks)
Which TWO of the following statements apply to contracts governed by the Unfair Contract Terms Act
1977?
A. Any clause excluding liability for breach relating to the quality of the goods is subject to the
reasonableness test
B. Any clause excluding liability for personal injury due to one party’s negligence will only be upheld if
it is reasonable
C. The Act applies to exclusion clauses contained in contracts relating to the transfer of an interest in
land
D. The reasonableness test takes into consideration the relative bargaining strength of the parties to
the contract
Question#31:
On which of the following dates does a partnership begin?
A. The start date of the first accounting period
B. The date on which the partners agree to go into business together
C. The date on which the partnership starts trading with the public
(1 Marks)
Question#32:
(2 Marks)
Sue owns a delicatessen and has contracted with Tim to supply her with fresh bread every day for the
next ten weeks. After six weeks, Tim tells Sue that he is unable to continue to supply the bread.
Which TWO of the following statements are true?
A. Sue can affirm the contract
B. Sue can obtain an injunction preventing Tim from breaching his contract
C. Sue can wait a further four weeks and then sue for damages
D. Sue can accept this as a breach of contract and sue for damages now
Question#33:
(2 Marks)
Sarah and Hannah have decided to set up business selling curtain fabric. Discussions have taken place
with their solicitor, who is just about to submit documentation to Companies House to form a new
company, Weave Ltd, on their behalf. Yesterday Sarah entered into a long-term supply agreement
with a fabric manufacturer and signed the contract 'for and on behalf of Weave Ltd'.
For each of the following statements, identify whether it is true or false.
.
True False
A. The contract between Sarah and the supplier can be subsequently ratified by Weave Ltd
B. Weave Ltd will be liable under the contract from the date of incorporation
Question#34:
Which of the following is an offer?
(1 Marks)
A. An invitation to tender
B. A tender
C. A display of goods in a shop window
Question#35:
(2 Marks)
Bruce and Sheila both perform work for Boomerang Ltd. Bruce supplies his own tools, but is given a
uniform and must stop whatever he is doing and report for duty if Boomerang Ltd calls him. Sheila
generally works alone; however she is unable to complete most tasks without the help of other workers.
Indicate whether Bruce and Sheila are self-employed or an employee.
.
Self-employed Employee
A. Bruce
B. Sheila
Question#36:
(1 Marks)
Which of the following can be achieved by a private limited company passing a written resolution?
A. The removal of an auditor
B. The removal of a director
C. The appointment of a director
Question#37:
(2 Marks)
In relation to a company paying a dividend, which of the following statements is correct?
A.
B.
C.
D.
Any unlawful dividend may be reclaimed from the shareholders or the directors
All dividends to preference shareholders must be paid irrespective of company profits
The dividend may be increased by the members if they object to the directors' recommendation
A dividend may be partially funded from the share premium account
Question#38:
(2 Marks)
A defendant being sued under the tort of negligence has offered a defence that the claimant knew
about and fully and freely consented to the risk.
Which of the following describes this defence?
A.
B.
C.
D.
Novus actus interveniens
The 'but for' test
Contributory negligence
Volenti non fit injuria
Question#39:
(1 Marks)
In relation to the registration of a company, which of the following names will NEVER be permitted?
A. One which implies a connection with the government
B. One which is the same as the name of a company already on the register
C. One which implies a connection with a professional body
Question#40:
(2 Marks)
Which rule of statutory interpretation suggests that words draw meaning from the other words
around them?
A.
B.
C.
D.
Expressio unius est exclusion alterius
Noscitur a sociis
Eiusdem generis
In pari materia
Question#41:
(1 Marks)
If a worker is deemed to be an employee, which of the following would NOT be correct?
A. They would receive statutory sick pay
B. They would benefit from vicarious liability
C. They would receive their pay gross of all taxable contributions
Question#42:
(2 Marks)
Lewis is a shareholder in Mayton plc. After reading the company's most recent annual accounts, Lewis
is so impressed with how the business is doing that he decides to buy additional shares on the stock
exchange.
It later becomes clear that the accounts have been prepared negligently and that "far from doing
well" the company is actually doing very badly. Lewis intends to sue X & Co, the firm of accountants
that prepared the accounts.
Is X & Co liable to Lewis for negligent misstatement and for what reason?
A. No, because Lewis bought his new shares from an existing shareholder and not from Mayton plc
itself
B. Yes, because it is reasonably foreseeable that existing shareholders would rely on the accounts for
the purpose of reviewing their investments
C. No, because X & Co does not owe a duty of care to existing shareholders who rely on the accounts
when deciding whether to vary their shareholding in Mayton plc
D. Yes, because Lewis bought the additional shares as a direct result of reading the accounts
Question#43:
(2 Marks)
Which TWO of the following statements about the remedy of re-engagement in unfair dismissals are
true?
A. The employee returns to their old job under the same conditions
B. The employee takes on a new role for the same employer on comparable terms to the old job
C. The employee will have to return to the company even if it is not their wish to do so
D. It should not be made where there has been a breakdown in confidence between the parties
Question#44:
(1 Marks)
Which of the following statements about acceptance of an offer in contract law is true?
A. The offeree may choose which terms of an offer to accept
B. There must be some form of positive action by the offeree either spoken, written or by conduct in
order to accept the offer
C. Following a valid acceptance, the offeror can still withdraw from the contract prior to performance
Question#45:
(2 Marks)
Finmere Eagles FC Ltd is a semi-professional football club. John is the majority shareholder and
chairman. He has been personally approving purchases of high-profile footballers for extravagant
transfer fees, while deliberately ignoring creditors for many months. The other directors are
concerned about this, and also about the ability of the club to meet its financial obligations, but have
left all major decisions to John, convinced that he knows best.
To what extent are John and the other directors liable if the company becomes insolvent?
A. All directors and officers may be liable for wrongful trading
B. Only John may be prosecuted for fraudulent trading and the other directors have no liability
C. John may face charges of fraudulent trading and the other directors may be liable for wrongful
trading
D. All directors may face criminal charges for fraudulent trading
Question#46:
(6 Marks)
Background
Garry saw an advertisement which stated:
‘Invitation to tender: 500 wooden containers required of 100cm x 100cm x 100cm to be supplied over
the next three months. Contact Hugh at Haulage Ltd’.
Garry emailed Hugh saying that he would meet the requirements at a price of £5,000. Hugh then
phoned Garry to say that he no longer required containers on the advertised terms. However he
enquired whether Garry's firm would consider an arrangement to produce such quantities of the
containers as Haulage Ltd may order from time to time, Garry agreed to such an arrangement.
Task 1
4 marks
For each of the following statements, identify whether it is true or false.
.
True False
A. Hugh's phone call amounts to a counter-offer
B. The initial advertisement placed by Haulage Ltd is an invitation to treat
C. Garry's agreement to produce such quantities of the containers as Haulage Ltd may order from time
to time is an offer
D. Garry's email amounts to an acceptance
Task 2
2 marks
Garry said he would produce containers as required as long as he was paid £10 per container supplied.
As time progressed, Garry produced what was ordered. This continued for six months until Garry
decided that on balance, the work was not making him as much money as he had expected. Garry then
called Hugh to advise him that he would not be able to supply any further containers.
Which TWO of the following statements are true?
A. Garry is contractually obliged to continue supplying containers until Haulage Ltd terminates the
agreement
B. It is not possible to enter into binding contractual agreements such as Hugh is requesting, owing to a
lack of certainty of terms
C. Garry can withdraw from the arrangement at any time but must fulfil orders already placed
D. Each order placed by Hugh over the first six months amounts to a separate acceptance and
therefore a separate contract
Question#47:
(6 Marks)
Background
KTP & Co is a partnership which operates toy stores throughout the UK. On 1 October 20X4, KTP & Co
appointed Harry as a partner. On the same day, Jack, who had been a partner for many years, decided to
retire from the partnership with immediate effect. Jack told his fellow partners of his decision but did
not notify anyone else that he was leaving that day.
For some months, KTP & Co had been negotiating a contract for a large consignment of soft toys with an
existing supplier. On 2 October 20X4, the firm signed the contract. Harry only found out about this
contract at the end of November. December sales were very disappointing and very few of the toys
were sold. The soft toy supplier is now demanding payment in full.
Task 1
2 marks
What is Harry's legal position regarding liability for payment to the supplier for the soft toys, and for
what reason?
A. He is only liable for the soft toy contract up to the amount of the capital, if any, he has invested in
the partnership
B. He is jointly and severally liable with the other partners for the soft toy contract because it was
signed after he joined the firm
C. He is not liable for the soft toy contract as he only found out about it after it had been signed
D. He is not liable for the soft toy contract as all the negotiations took place before he joined as a
partner
Task 2
2 marks
For each of the following statements regarding Jack's liability for the soft toys, indicate whether it is
true or false.
.
True False
A. He is not liable for any monies due to the soft toy supplier because he retired from the partnership
before the contract was signed
B. If his former partners fail to pay the monies owed he will be liable to the soft toy supplier
Task 3
2 marks
For each of the following statements regarding the liability of a retiring partner, indicate whether it is
true or false.
.
True False
A. A retiring partner is liable for partnership debts incurred prior to their retirement, unless released
from liability by the creditors
B. A retiring partner is liable for partnership debts incurred by the firm for six months after they retire
Question#48:
(6 Marks)
Background
Mega plc wishes to expand overseas, and has embarked upon a number of schemes in order to raise the
finance necessary for investment.
Mishra subscribed for additional shares in Mega plc, which were offered as part of a rights issue. The £1
nominal shares were made available at a price of £3.
Joel purchased a £100,000 debenture secured against the main factory building of Mega plc via a fixed
charge.
Task 1
2 marks
What is the minimum payment Mishra will have to make for each share?
A. One quarter of the nominal value plus share premium (£2.25)
B. Nominal value plus one quarter of the share premium (£1.50)
C. Share premium (£2)
D. Nominal value (£1)
Task 2
2 marks
Which TWO of the following statements relating to the fixed charge held by Joel are true?
A. Until the charge crystallises Mega plc may carry on in business in the usual way
B. It attaches to specific assets upon creation
C. The charge will be effective from the date of creation if registered within 21 days
D. It is over a class of assets present and future
Task 3
2 marks
What is the correct formula governing the distribution of dividends in a PRIVATE company?
A. Accumulated unrealised profits less accumulated realised losses
B. Accumulated realised profits less accumulated realised losses
C. Accumulated realised profits less accumulated realised losses and unrealised accumulated losses
D. Accumulated unrealised profits less accumulated realised losses and unrealised accumulated losses
Question#49:
(6 Marks)
Background
The actions of the directors of XYX plc have caused concern to some of the company's shareholders on
two occasions:
(1) A takeover bid was made for XYX plc which the directors believed was not in the company's best
interests. To ensure that the bid was rejected, the directors allotted new shares to a third party.
A group of minority shareholders who were in favour of the takeover bid feel that their interests
have been prejudiced.
(2) Two directors of XYX plc resigned recently. It has come to light that these two directors had
previously set up their own company, DTS Ltd in order to secure a contract with PRK Ltd, an
existing client of XYX plc.
Task 1
2 marks
Which TWO of the following statements apply to XYX plc's directors regarding the allotment of shares
to the third party?
A. The allotment of shares for the purpose of preventing a takeover bid is an improper use of the
directors' powers
B. The directors' actions cannot subsequently be ratified by the members if the directors have used
their powers improperly
C. As the allotment of shares by the directors prejudiced the interests of the minority, the allotment is
invalid
D. The directors have a duty to exercise their powers for the purposes for which they were conferred
Task 2
2 marks
Which of the following statements regarding the contract secured by DTS Ltd from PRK Ltd is correct?
A. As the directors resigned from XYX plc before setting up DTS Ltd, no action can be taken against
them
B. As DTS Ltd is a separate legal person, no action can be taken against it or its directors in respect of
the contract secured from PRK Ltd
C. The directors of DTS Ltd may be accountable to XYX plc for the profit made on the contract secured
from PRK Ltd
D. As PRK Ltd is entitled to award a contract to whichever company it chooses, XYX plc cannot recover
any profit made by DTS Ltd on that contract
Task 3
2 marks
Which TWO of the following statements regarding the duties owed by directors to their company are
correct?
A. The duties are owed by anyone classed as being a director
B. Directors owe their duties to the members of the company
C. Directors are never permitted to put personal interests before the interests of the company
D. One director is not liable for a fellow director's breach of duty
Question#50:
(6 Marks)
Background
Arya is a solicitor. Frank is a businessman who owns a small motor repair shop. Frank first instructed
Arya two years ago, when he was buying a house. Frank has recently deposited funds with Arya and
instructed her to undertake the following transactions on his behalf:
(1) Purchase a local chain of salons, which Frank intends to fund with a large cash deposit and a
mortgage for the balance
(2) Transfer a small cash sum to a bank account in Farland, which Frank recently opened up while
on holiday there
Arya has heard rumours that Frank is involved in criminal activity and thinks these rumours might be
true. However, she has no proof and so she agrees to act on Frank's behalf.
Task 1
2 marks
If the funds which Frank has deposited with Arya are the proceeds of crime, indicate which offences
each party has committed.
.
Money laundering only Failure to report only Money laundering and failure to report
A. Arya
B. Frank
Task 2 2 marks
For each of the following statements regarding the transfer to the bank account in Farland (and
assuming that the sum is the proceeds of crime), indicate whether it is true or false.
.
True False
A. Because the cash sum to be transferred is immaterial, Arya is not obliged to report her suspicions in
relation to it
B. Transferring funds from the UK to a bank in Farland is an example of integration by Frank
Task 3
2 marks
Which TWO of the following are valid defences against a charge of money laundering?
A. Disclosure is made by a person to the authorities before laundering takes place
B. The organisation has failed to appoint a money laundering reporting officer so no there is no one to
make a disclosure to
C. A person involved in money laundering has a reasonable excuse for non-disclosure
D. A person involved in money laundering did not know that the funds originated from proceeds of
crime